Professional Documents
Culture Documents
Chapler Oulline
Introduction and Meaning, Organisation for Accounting and Control of Labour Cost; Labour
Tumover, Time Keeping and Time Booking, Payroll Accounting, Overtime, Idle Time, Methods
of Wage Payment, Incentive Schmes, Problems and Solutions, Examination Questions
LABOUR TURNOVER
In all business organisations, it is a common feature that some workers
leave the employment and
new workers join in place of those leaving. This change in work force is known as
labour turnovel
(Labour tumover is thus defined as "the rate of change in the composition of the labour force
"
organisation. Labour turnover varies greatly between different trades and industries. For
where part-time and seasonal labour is exam
employed, the rate will be higher, of
Measurement of labour turnover. To facilitate comparisons between
undertakings, labour turnover may be expressed in a rate.
different periods and differen
Ca
There are three alternative methods
by which this rate is computed. Once a particular metnou
used, it should be consistently followed for comparative
1. Separation method. This analysis. The methods are:
method takes into account
organisation during a particular period. Its formula is: only those workers who have let Av
Labour Turnover Rate = - No. of workers left during a
period x 100 pla
Average No. of workers during the period
Average Number No.of workers in the beginning +No. of workers at the end of the
2
Multiplication by 100 in the
above formula indicates rate in bee
2. Replacement
method. This method takes into percentage. have
joined in place of those who have left. Its formula account only those new workerS
is:
Labour Turnover Rate = No. of workers replaced during the
period
Average No. of wo:kers during the perñiod x 100 t rot
If additional
workers are engaged for they at
not considered for this computation. expansion programme or any other such purpose,
Labour C o s tC o n t r o l
3.5
17) Labour participaion management and joint consultation scheme. A continuous Stuay
in
taken
essential to analyse the factors responsible for high labour turmover and steps may be
as against those particular factors.
TIME KEEPING,
of accounting and contro
Thetime-keeping department is an important part of a firm's system time of
record each workers
oflabour cost. The main function of this department is to accurately
or processes. Thus 1t
in the ractory and also the time spent on different jobs
iual and departure
anva
embraces two f u n c t i o n s :
Methods of Time-keeping
three methods of recording attendance of workers:
mainly recorded in
There are
attendance of each worker is
(Muster Roll). In this method, columns for
1. Attendance Register sufficient number of
This register provides the foreman
the register maintained
for this purpose. columns may be made by
Entries in the arrival and departure their entries to
attendance of each worker. should be required to sign against
literate, they each department if the
or the worker
himself. If workers are be maintained in
attendance registers may
on. Separate
avoid any dispute later serve the purpose
workers is
otherwise one register may when the number of
number of workers is large, it can be used only
But done by the
and cheap. as the work is
This method is quite simple for a separate time-keeper
there is no need
In such cases generally
Small. identification number
and that number is
foreman. worker is allotted an
tokensare
2. Token or Disc
Method. Each
disc) with a hole in it. All such
on a round
metal token (or he removes his
painted or engraved gate. As the worker arrives,
Suntably placed at the factory another board which is
specially
on a board or hangs it on
nung in a serial order in a box kept nearby
second board is
removed. Those coming
from the board and puts it the box or the arrival can
OXen After the fixed time, so that exact time of their
office
ept for this purpose. their tokens personally at the time
ate have to hand over absentees are indicated
be noted. basis of tokens in the box. The
attendance on
the in the evening.
time office records followed at the departure time by
Lne similar procedure
is
his absentee
friends marked present
tokens. A to get
y
ne missing as a
worker may try
rmethod is not fool-proof
us attendance and proves quite
uropping their tokens in the box. method of recording
is a mechanical
This
Time Recording Clocks.
is fairly large.
serul when the number of workers
3.12 o Cost Accounting
(b) Workers sent to site. Some workers may be sent to site or customers premises for perfomine
work. For example, some companies supplying engineering products provide after sales serviceand
ing
workers are sent to customer's place when so required. Such outworkers imay while away their tine
when they go out for work. Job cards should be issued to them so that labour cost of work done rcan
be ascertained. Surprise visits by supervisors at the place of work will have a moral effect and helph
controlling such costs.
OVERTIME
Overtime occurs when a worker works beyond normal working hours. The normal working hou
arelaid down in the Factories Act. Accordingly, any worker working for more than 9 hours per day or
more than 48 hours per week is entitled to
overtime payment. The Factories Act also provides for
normal rates of wages, The overtime work is, therefore, a
payment of overtime wages at double the
costlyaffair and should be avoided as far as possible due to the following disadvantages attached to
it
(a) It leads to excessive labour cost.
is decreased because of diminishing labour
(b) During overtime hours, labour productivity
efficiency.
and machinery.ad ghub po beztiod6
16 V ga
C)It puts an extra strain on plant
(d) It has a bad effect on the health of workers.
increase because of work in the evening.
(e) Certain overheads, like lighting cost,
a tendency to work in overtime
and take overtime wages as a part
DE Workers develop
may
their nomal earnings.
work is not properly distributed among workers, it may lead to discontent.
overtime
Treatment of overtime. Payment for overtime consists of two elements:
The nomal
treatment of overtime premium. This overtime premium 15
working. The difficulty lies in the L h1oTAT
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EL'E 104110) 1soJ unoqu1
(a) Time Rate System; (6) Piece Rate System; and (c) IncentiveSchemes.
Payment may be based upon the hour, the day or the week, o r it may be at the fixed salary rate.
For example, a worker is paid at 8 per hour, if he works 10 hrs. during the day, his wages for the
day will be 10 hrs.x 8 =
80.
Suitability of Time Rate System. Time wage system is suitable for the following type of
situations
Cost Accounting
3.16
2. Low quantity. When workers are paid on time basis, they tend to be slow in work. This results
in lower production quantity.
3. Extra supervision costs. Under this method extra supervision is needed so that woIkers do not
waste time. Appointment of additional supervisors increases cost.
Costing difficulties. From costing point of view, it creates difficulties in the calculation of
labour cost per unit because the output is quite fluctuating.
5. Idle time. Workers waste a lot of time resulting in increase in idle time.
For instance, if rate per unit is 17 and during a day a worker has completed 10 units, then his
nes uill ha
allu
aristlC
is of
INCENTIVE SCHEMES
Roth time rate and plece rate systems have their own strong
points and drawbacks.
and drawbacks Incentive schemes or bonus system is a
ints
Compro
romise between the two, combining the good points of each
Important Incentive Schemes
Halsey Plan
ctm, Under incentive
ystem. Under
ySt
schemes, time rate and piece rate systems Rowan Planutoboobe
rsbrs
ae
are
combined in such a way that workerS are induced to increase Taylor's Plan
their productivity. The gains arising from the efficiency of a worker
are shared between the worker and the employer in agreed proportion. In this way, both the employers
and the employees benefit from these incentive plans. Incentive plans are, however, used in various
forms and with different names. In these systems, standard time for each work is pre-determined and
bonus is given to those workers who finish their work within or less than the time specified.
Some of the principal incentive plans are discussed below
1. Halsey Plan
2reed
Introduced by F.A.Halsey, it is a simple combination of time and piece methods of wage payment.
Under this plan, amount of bonus depends upon the time saved by the worker. A standard time is
fixed for each job and if a worker completes the job in less than the standard time, he gets wages for
the time worked plus a bonus equal to 50% of the value of time saved. But if a worker completesthe
JOD in full standard or more than standard time, he gets wages at the time rate. Thus wages according
the following
tO time basis are quaranteed. Calculation of bonus and total earnings is done by
formulae:
Bonus = 50 % (Time saved x Rate per hour)
Total earnings taken x Rate per hour) + 50% (Time saved x Rate per hour)
=
(Time
Where, Time saved = Standard time -
Time taken
Solution
Total earmi
d earnings = 40 hours x 10+12 (8 hours x10)
= 400 + 40 = R 440
rective wage rate per hour =7 44040 hrs. = 11.
(6) The workers may be encouraged to rush through work and thus neglect the qualit a
production in order to earn extra bonus.
(c) The incentive is not so strong as with piece rate system.
Illustration 3.2
Standard time allowed for a job is 20 hours at the rate of <2 plus D.A. at 60 paise per hon
worked. Actual time taken by a worker is 15 hours. Calculate his earnings under Halsey Plan.
(B.Com., Maduai
ort prtur5
Solution
20 hrs. -15 hrs. = 5 hrs.
Time saved
Calculation of earnings
Wages for time taken (15 hrs. x 7 2) e 30o seod of
D.A. (15 hrs. x Re. 0.60)
Bonus (5 hrs. x R 2) x 50% 5
Total earnings 44
Illustration 3.3
In a factory the standard output is 48 units per week for a working week of 48 hours. The hourty
rate is 2. Three workers A, B and C produce 42, 48 and 72 units in a particular week. Find outthe
earnings of each worker under the Halsey system of wage payment. (B.Com.MysOTe
Solution
Workers
4 B
Time allowed for 48 units (hrs.) 48 48 48
Actual output (units) 42 48 72
Time taken for actual output (hrs.) 48 48 48
Time saved (hrs.) Nil Nil
Note. Worker A has produced only 42 units which is less than standard output. He will, there
be paid on time basis i.e., for 48 hours.
L a b o u rC o s t C o n t r o .
3.19
48 40
40 x 10 + x 40 x 10
Total earmings
=
48
= 400 + 66.70 = 466.70
Advantages
to time basis.
(a) It guarantees wages accordingit under Halsey plan.
provides a higher bonus than
(b) Upto 50% of the time saved, when standard has not been properly fixed.
to the employer
(c) It offers protection rate, at higher levels
of efficiency, the worker is
not
estimated time to
Tlustration 3.4 quaranteed 44 hour week is Re.
0.75 per hour. The
increased by 20%.
Workman's waqes for a plan, the time allowed is
A under an incentive
under each of the following
30 minutes and
Ouce one article is 100 articles. Calculate the wages
o r(B.Com. Bangalore)
a week, a worker produced System.
Dunng Rowan System, and (¢) Halsey
methods: (a) Time Rate, (b)
Solution
(a) Time Rate System = 33
Re. 0.75
Wages for 44 hours
(6) Rowan System: 3 0 minutes per article
article
St. time per article = 6 minutes per
Add: 20% increase 3 6 minutes per article
Time allowed under
incentive plan = 100 articles
minutes or 60 hours
minutes =3 600
Actual output = 100 x 36
Time allowed 4 4 hours
44 hrs. = 16 hours = 33.00
Time taken = 60 hrs.
-
0.75
Time saved = 44 hrs. Re.
Wages for time taken
Labour Cost Control 3.21
3. Effect on labour cost. Labour cost per unit decreases as production increases up to the
standard, thereafter it continues to decrease but not so rapidly. Rowan cost per unit is higher than
under Halsey plan until time saved is 50% of time allowed. Thereafter, it is lower and soon becomes
substantially lower. At 50% time saved, labour cost per unit is the same under both the plans
Illustration3.5
-